Vishal Mega Mart Ltd.'s June-quarter earnings came in slightly ahead of expectations, prompting Jefferies to reiterate its bullish stance on the retailer. The brokerage retained its 'Buy' rating and target price of Rs. 160, implying an upside of about 45.5% from the current market price.
Jefferies said the retailer continued to benefit from healthy demand, strong execution and disciplined cost management. The brokerage expects easing inflation, continued store expansion and improving operating leverage to support earnings growth over the coming quarters.
The company reported double-digit growth in revenue, operating profit and net profit during the June quarter.
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Vishal Mega Mart Q1 Highlights (Consolidated, YoY)
- Revenue rose 18.7% to Rs. 3,727 crore from Rs. 3,140 crore.
- EBITDA increased 18.6% to Rs. 545 crore from Rs. 459 crore.
- EBITDA margin remained flat at 14.6%.
- Net profit climbed 25.6% to Rs. 259 crore from Rs. 206 crore.
- Board approved a proposal to cap aggregate foreign ownership at 49.99%.
Jefferies said same-store sales grew 10% during the quarter, driven primarily by new customer additions, while existing customers also increased spending. Gross margin expanded 30 basis points to 28.7%, aided by lower promotional expenses, while adjusted EBITDA margin improved marginally to 10.4%.
The brokerage noted that Vishal Mega Mart's category mix remained largely unchanged, with apparel contributing 47% of sales, general merchandise 27% and FMCG 25%. Own brands continued to account for nearly 75% of revenue despite a marginal year-on-year decline.
The retailer added a net 24 stores during the quarter, taking its network to 819 outlets. Jefferies said the company is expanding its smaller-format stores, plans to introduce a new store format and is gaining traction in southern India.
The brokerage also highlighted the rapid expansion of Vishal Mega Mart's quick-commerce platform, which now operates through 767 stores across 520 cities, offering deliveries within 30 minutes. Its user base increased 44% year on year to around 14 million.
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